A burst of strength on Wall Street yesterday came to the rescue of a London market suffering from interest rate nerves and the impact of sterling's latest surge.

After an indecisive morning, the London market moved confidently into positive territory during the last 20 minutes of trading, as the Dow Jones Industrial Average posted an 80-point plus rise.

At the close, the FTSE 100 was 20.3 higher at 5,932.2, recovering strongly from its earlier ragged performance. The index was down around 36 points before Wall Street's opening.

The late rally in the leaders did not extend to the second-liners and smallcaps, however, which finished the day in negative territory.

The FTSE Mid-250 was never under as much pressure as the 100 index but gave up modest gains to settle 2.9 lower at 5,525.4, having posted a 5.8 rise in the early part of the day. The FTSE SmallCap was up 3.9 at best, but fell into negative ground during the afternoon, eventually closing at the day's lowest, down 4.9 at 2,629.5.

Dealers said the late surge in British stock prices reflected a more relaxed attitude by US investors to yesterday's meeting of the Federal Reserve's open market committee, which met to determine interest rate policy.

"The feeling in the market is that the Fed will leave rates on hold but we need to get the whole interest rate thing out of the way before London makes a decisive move in either direction," said one salesman.

He said there were many fund managers in London still fretting about the possibility of an interest rate rise here after the next meeting of the monetary policy committee, which commences next Wednesday; the decision on whether to increase rates or leave them on hold will be announced at midday the following day.

The minutes of the February meeting revealed the committee was split four-four over whether to lift rates, with Mr Eddie George, governor of the Bank of England, using his casting vote to leave rates unchanged.

Commenting on the market's technical picture, Mr Richard Lake at Brewin Dolphin, the stockbroker, said the FTSE 100 "remains in a strong up-trend and comfortably above its rising 50day and 200-day moving averages and a move into the 6,000-6,500 area is not a particularly large rise". But Mr Lake warned of his concern that two dominant sectors, retail banks and pharmaceuticals, continued to ease in absolute terms.